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    EPLI Insurance

    Topics: EPLI Coverage

    Twenty years ago, employment practices liability insurance, or EPLI, wasn’t widely used in the United States; even a decade ago, most companies weren’t purchasing it. Although its value is undeniable, EPLI is still an underutilized coverage option, with only 23 percent of companies with fewer than 100 employees investing in EPLI coverage. The percentages begin to climb for companies with larger staffs. Thirty-four percent of businesses with between 500 and 700 employees have EPLI, while 40 percent of businesses employing more than 1,000 people have a policy.

    With many widely publicized employment liability cases in the media over the past few years, including high-profile sexual harassment cases, it’s no wonder more businesses are adopting EPLI policies. Those that aren’t could be putting themselves at risk for a costly lawsuit.

    The Repercussions of an EPL Insurance Claim

    EPLI claims, trends, stats and examples

    An employee lawsuit can be emotionally and financially devastating. Beyond damaging a company’s reputation, an employment claim can lead to lower morale, diminished productivity, lost trust and thousands in legal expenses. In fact, the average cost for defending and settling employment law cases is $160,000 – enough to stagger any small business.

    What is EPLI Coverage?

    Offered on a stand-alone basis or combined with an existing policy, EPLI helps safeguard businesses against employee lawsuits alleging inappropriate or unfair acts. Even when done unknowingly, violating an employee’s (or contractor’s) rights can have devastating consequences. Former, current or potential employees who believe the employer has violated their legal rights can file lawsuits.

    What Does EPLI Cover?

    Available as a policy endorsement or stand-alone coverage, EPLI provides protection against many kinds of employment-related claims, including:

    • Sexual harassment. The harassers can be senior managers, supervisors, co-workers or even non-employees.
    • Discrimination. This includes unfair treatment based on religion, age, ethnicity, gender, disability, skin color, sexual orientation or race.
    • Wrongful termination. According to the Equal Employment Opportunity Commission (EEOC), this is the most common claim brought against employers.

    Also covered are breach of an employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of a career opportunity, wrongful infliction of emotional distress and mismanagement of employee benefit plans.

    While an essential coverage tool, EPLI policies are not all encompassing. They commonly exclude criminal or civil fines, penalties or punitive damages, bodily injury and property damage claims, state unemployment insurance claims, workers’ compensation claims, and claims filed under the Fair Labor Standards and Occupational Safety and Health Acts.

    Most EPLI policies will reimburse a company for the costs of defending a lawsuit in court, as well as for judgments and settlements. The policy usually covers legal costs, regardless of the suit’s outcome.

    EPLI Coverage: A Big Concern for Small Businesses

    Understanding your employees’ rights is paramount to protecting your business. During FY 2018, the EEOC resolved 90,558 charges of employee discrimination, securing $505 million for victims in both private sector and government workplaces. More than 40 percent of EPLI-related lawsuits are filed against private companies with fewer than 100 employees.

    Other notable stats illustrate the importance of EPL Insurance:

    • In FY 2018, the EEOC fielded over 200,000 inquiries regarding potential discrimination claims.
    • The EEOC received more than 7,600 sexual harassment charges in FY 2018.
    • The average cost of settling out of court for an employment claim is $75,000.
    • The average jury award for an employment-related case is $217,000.
    • The average duration of an employment claim spans more than 300 days.

    Trending Employment Practices Liability Claims

    According to industry experts, pregnancy discrimination, medical marijuana use and sexual harassment claims are among the top trending employment practices litigation cases. Moreover, the average cost of employment-related claims is rising, along with the length of time it takes to resolve a claim.

    Sexual Harassment Lawsuits. The growth of the #MeToo movement has contributed to a significant jump in harassment lawsuits filed with the EEOC over the past two years. In 2018, the EEOC recovered approximately $70 million for those filing claims, according to The National Law Review.

    Medical Marijuana Use. On April 9, 2019, the New York City Council passed a law that will prohibit employers from conducting pre-employment drug testing for marijuana. This decision could spark the creation of similar legislation across the country. As state cannabis laws continue to evolve, employers must educate themselves for their protection.

    Website Accessibility Lawsuits. In today’s digital age, many individuals cannot use websites that are not accessible to the blind and visually impaired. In the eyes of the law, this is a violation of the Americans with Disabilities Act. As a result, claims are on the rise.

    Whistleblower Claims. Enforcement actions in response to whistleblower claims have resulted in more than $1 billion in fines and penalties, according to the Securities and Exchange Commission.

    Invasion of Employee Privacy. Whether it’s done from a computer or through the lens of a security camera, many companies monitor their employees at work. While employers have rights in the workplace, so do their employees. Employee privacy is becoming one of the biggest hot-button employment issues.

    Illegal Background Checks. The Fair Credit Reporting Act (FCRA) sets national standards for employment screening. Two common tools employers use to screen candidates are credit reports and criminal background reports. However, a candidate must provide written consent before an employer can request these documents. Businesses that attempt to secure this information without a candidate’s consent are inviting a potentially damaging lawsuit.

    Pregnancy and Lactation Accommodations. The Pregnancy Discrimination Act requires employers to allow pregnant employees to work at their jobs as long as they can perform their duties. Additionally, employers must accommodate nursing mothers with lactation breaks as well as private, sanity lactation spaces.

    Genetic Discrimination. GINA, the Genetic Information Nondiscrimination Act, prohibits employers from using genetic information as a factor in employment-related decisions. Under GINA, employers cannot request family medical history or any other kind of genetic information from job applicants.

    Unpaid Internships. Employee or intern? It’s a question the U.S. Department of Labor can answer. Interns, unlike employees on a payroll, are not subject to the Fair Labor Standards Act. To protect themselves, businesses should know what defines an internship. Visit the Department of Labor’s Test for Unpaid Interns for six key criteria.

    Adopting a Policy of Prevention

    Taking the following steps will help reduce your employment practices liability risk:

    1. Review potential loss exposures with your insurance agent and purchase suitable EPLI coverage.
    2. Create and implement effective screening and hiring programs to avoid discriminatory hiring practices.
    3. Develop an employee handbook. AmTrust offers our insureds access to an array of compliance-focused resources, including a dedicated website, sample employee handbooks and an HR forms library. For your protection, be sure your handbook includes an employment at-will statement and equal employment opportunity statement.
    4. Create a detailed job description for each role. Each job description should clearly define the required skills and performance expectations.
    5. Institute a zero-tolerance policy regarding substance abuse, harassment and any form of discrimination. Additionally, have an "open door" policy in which employees can report infractions without fear of retribution.
    6. Post company policies in the workplace reinforcing your stance regarding unacceptable – and illegal – workplace behavior.
    7. Document all employee complaints as well as what your company did to resolve those issues.

    Like their larger counterparts, small businesses can be the target of a potentially devastating lawsuit. Helping protect thousands of small businesses like yours, AmTrust can customize our coverage to safeguard your business against any employment-related risks.

    This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.


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